November 30th, 2009
Look for our market outlook quoted in the December issue of Futures Magazine!
We have been reminding readers of the infamous Thanksgiving rally for weeks but this year it just wasn't meant to be. A poorly timed announcement in regards to a plea for a Dubai debt restructure sent equities swooning in thin holiday trade.
While many American's naively assumed that because the New York Stock Exchange was closed for business their equity holdings weren't changing value, the futures markets were in panic mode. At one point in overnight futures market trade, the S&P was down nearly 50 handles from its close on Wednesday. Luckily, the markets quickly gathered composure and ended Friday's session with hefty but not crippling losses.
In our opinion, the market's reaction to the Dubai World news was grossly exaggerated by the holiday. Had the announcement come during a more "normal" trading session things might not have been nearly as volatile. Additionally, it is likely that many traders that were long the markets placed their sell stops ahead of the holiday weekend leaving the market vulnerable to large and irrational moves on sell stop running. In the larger scheme of things, the markets have failed to trade on fundamentals in recent months and that trend seems to be intact.
Continue reading "So much for the Thanksgiving rally! " »
November 30th, 2009
Look for our market outlook quoted in the December issue of Futures Magazine!
News of a possible Dubai World debt default, Treasuries spent the Thanksgiving shortened trading sessions running wild. We had mentioned last week that we felt as though the quiet trade was due for an increase in volatility and as expected the price move brought bonds and notes to better levels. The strength of the rally was a bit more than we had originally anticipated but we feel as though the bull run is nearing a temporary high. After all, a Dubai World debt restructure wasn't a complete surprise and had the news hit during something other than thin holiday trade their might not have been nearly as much panic. That said, the impact of a Dubai default on the U.S. markets is relatively minimal. The market's concerns were likely focused on the possibility of similar news from many other entities.
Our clients were recommended to cancel the standing order to sell the January bond 125 calls for 20. Instead, they were encouraged to sell the February 128 calls for about 25 ticks (fills ranged from 24 to 25). This trade offers a slower rate of premium erosion but also carries a lower delta (less immediate risk) and has much more room for error. Given the uncertainty of last week's events and the market's reaction to such, it seems as though being prudent is the way to go. If you would like to be notified of changes in trading recommendations that occur intraday, such as this, open a trading account with DeCarley. We offer full service as well as discount online trading and all of our clients receive email updates during the trading day.
Aside from the Chicago PMI, traders had little news to go on Monday morning. The regional purchasing managers index pointed toward growth at a reading of 56.1; much better than the expected 53. The news will pick up tomorrow with the ISM index, constructions spending and pending home sales.
Continue reading "Treasuries soar in holiday trade " »
One day less and low volume the past week. The previous top was not broken and friday price had to come down to a support level. A further correction move should be holding the better cards.
This should be confirmed by higher volume to really believe in starting of a medium term downtrend. Let's see what is happening next week.
With December coming up it is not impossible that the index will stay at this high level within a small trading range.
It looks like the index is making a rounding top. If that is the case, prices will drop slowly at first for the creation of the right side of this rounding top reversal pattern.
The last uptrend was not supported by volume. All indicators are moving down. The last (C) wave now seems to be complete and with this also the (Y) wave. There is no change in the positions. There is no manual long position for the moment and SATS2 is still holding the last long position. First support is at 1080, but if this support breaks I expect in first instance a further down move to 1030.
Continue reading "S&P500 Technical Analysis Update Nov. 28, 2009." »
The following excerpt is the continuation of yesterday's article from Raghee Horner's contribution to the best-selling ebook, High Profits in High Heels: Secrets from Today's Top Women Traders. Make sure you read the "Importance of Chart Patterns" post from yesterday first, then dive into the text below. Download this entire ebook today!
***Wedges are considered continuation patterns. The rule of thumb when analyzing or trading an established trend is to follow the trend until it breaks or transitions to a sideways market cycle. The break of a trend is defined by prices trading through the resistance of a downtrend or the support of the uptrend. Wedges can help a trader find an entry point within the context of a trend—which, contrary to belief, is a difficult thing to do correctly. Just because a market is trending doesn’t mean that any entry with the trend is a good one. The wedge offers a trader a point at which to short resistance at the upper downtrend line or play the reversal of the trend, which also is defined by the upper downtrend line.
Continue reading "Wedges, Triangles, and Rectangles to Trade with Raghee Horner" »
The following excerpt is from Raghee Horner's contribution to the best-selling ebook, High Profits in High Heels: Secrets from Today's Top Women Traders. It's a long article so I've broken it up over today and tomorrow. Download your copy today!
***Chart patterns are often the very first introduction traders have to charting the markets. There is something inherently familiar about chart patterns, and because of this, there is a comfort level to trading these common shapes. Triangles, rectangles, wedges, channels, and more—these are the patterns that are often identified on a chart, and through these patterns, key decisions can be made as to how and when to enter a trade. In that way, I believe chart patterns are a tremendous anchor to what we know as we venture into the unknown waters of trading for the first time.
Continue reading "Importance of Chart Patterns with Raghee Horner" »
November 23rd, 2009
Pick up Carley's book, "Commodity Options" at www.TradersLibrary.com!
Stocks started the week off with a bang; it seems as though Friday's option expiration was holding stocks down, rather than propping them up. With that out of the way, an economic calendar chock full of data and thinly traded markets we can't help but looking higher from here. Thanksgiving has always seen investors give thanks by buying up shares of stock, so we are expecting the December S&P to see 1130ish at some point this week.
Continue reading "Can you say "mutual fund Monday"?" »
November 23rd, 2009
Look for our market outlook quoted in the December issue of Futures Magazine!
Bonds and notes suffered at the hands of equity gains as investors are seep to be pouring money into "risky" assets such as commodities and equities. However, as has been the case, the selling across interest rate products lacked enthusiasm.
With the Thanksgiving Day holiday upon us, it is likely that the markets will see very little trading volume throughout the remainder of the week. Despite an action packed economic calendar and another round of sizable auctions, traders seem to have already called it quits. Some liquidity will come back for the first few weeks of December but the real volume typically doesn't show up until well into January.
The absence of trading volume, and traders, is important in that many proprietary desks leave their second string traders at the wheel. The combination of illiquidity and "back-up" traders can mean large and unexplainable market moves. If you recall, last year a few sessions before Thanksgiving the 30-year bond futures rallied approximately 10 handles over the course of three trading sessions. Seven of those handles took place in a single trading day.
Continue reading "Risk trade leaves Treasuries out of favor " »
And once more a new top at 1113.69, now very close to the long mentioned target of 1120, the 50% retracement of the long term downtrend. The last uptrend was not supported by volume. All indicators are turning down. The last (C) wave now seems to be complete and with this also the (Y) wave. It looks like the index is making a rounding top. If that is the case, prices will drop slowly at first for the creation of the right side of this rounding top reversal pattern. As mentioned last week I did not enter for a long trade because I was expecting price not to break the resistance at 1120. The SATS2 expert still has an open long trade. In the candlestick chart you can recognize something that looks much like an evening doji star top reversal. There is now support at 1080, but I assume this will not hold and price will move down for a first target at 1030.
Continue reading "S&P500 Technical Analysis Update Nov. 21, 2009." »
Continued from yesterday-- the conclusion of Oliver Velez's lessons on trading gaps. For more of his tips and strategies, pick up his best-selling book Strategies for Profiting on Every Trade.
Trading Gaps, Part 2
In the last lesson, I started a discussion about gaps. I talked about what they are, how they form, and why they form.While there are many strategies involving gaps, let’s look at a few examples here.
Continue reading "Trading Gaps, Lesson 2 with Oliver Velez" »
